An Incomplete Guide to PBS - with Mike Neuder and Chris Hager
Uncommon Core・105 minutes read
Uncommon Core delves into crypto concepts with discussions on PBS and MEV-Boost, emphasizing decentralization and efficiency in Ethereum block building through outsourced roles and trust-minimized interactions. The episode explores the evolving role of relays in PBS, debating the integration of ePBS into the protocol for sustainability and the importance of market forces in addressing censorship.
Insights
- PBS, or Proposal-Builder Separation, in Ethereum involves outsourcing block building to specialized builders for decentralization and competitiveness, maintaining trust-minimized interactions.
- MEV-Boost post-merge on Ethereum enables proposers to interact with external block builders through relays, facilitating auctions to prevent MEV theft and ensure trust.
- PBS benefits include decentralization of validators, offloading complexity to specialized builders, and opening new design possibilities for scaling solutions like roll-ups on Ethereum.
- The evolving role of relays in the PBS process may lead to reduced structural importance of out-of-protocol infrastructure, with debates on enshrining ePBS in the protocol or maintaining governance outside for sustainability.
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Recent questions
What is the design philosophy of PBS in Ethereum?
PBS, or Proposal-Builder Separation, is a design philosophy in Ethereum that recognizes the importance of protocol actors outsourcing certain tasks to third parties for efficiency and decentralization. It aims to create an interface between in-protocol and out-of-protocol roles, ensuring trust-minimized interactions and preventing centralization. Validators in Ethereum outsource block building to specialized block builders outside the protocol to maintain decentralization and competitiveness. This philosophy aligns with Vitalik's vision of centralized production, decentralized verification, and anti-censorship properties, emphasizing the need for decentralized and efficient scaling solutions.
How does PBS benefit the Ethereum network?
PBS benefits the Ethereum network by decentralizing validators, offloading complexity to specialized builders, and enabling more efficient scaling solutions. By creating an interface between in-protocol and out-of-protocol roles, PBS ensures trust-minimized interactions and prevents centralization. It opens up new design possibilities, like utilizing specialized actors for complex tasks in scaling solutions such as roll-ups on Ethereum. This design philosophy aims to keep validators simple and affordable to maximize censorship resistance, focusing on minimizing regulatory burdens and discretion over block construction.
What are the risks associated with centralization in PBS?
Centralization risks in PBS include a small number of relays and builders controlling a significant portion of the market, leading to fragility and potential network instability. Transitioning PBS to in-protocol systems poses technical challenges, including increased complexity, consensus protocol risks, and the need to eliminate reliance on external actors. The challenges of achieving consensus on transaction ordering and constraining validators in a general-purpose design like Ethereum are also discussed. These risks highlight the importance of maintaining decentralization and trust-minimized interactions within the PBS framework.
How do relays function in the MEV-Boost ecosystem?
Relays in the MEV-Boost ecosystem play a crucial role in facilitating auctions between proposers and builders to ensure trust and prevent MEV theft. They face challenges like security risks from adding more relays and the dominance of a few builders, impacting blockchain stability. MEV-Boost software provides DoS protection, validity checks, and payment checks, with performance and latency optimizations enhancing inclusion rates. Optimistic relaying simplifies relay operation by spreading out block simulation, aiming for more economic and sustainable relays in the future. The evolving role of relays may lead to a reduced structural importance of out-of-protocol infrastructure.
What are the key considerations in implementing commitments like PEPC-Boost?
The implementation of commitments like PEPC-Boost involves challenges and considerations such as ensuring commitments are encoded in block data for enforcement at the fork choice rule. PEPC allows proposers to make stronger commitments compared to EigenLayer, affecting block inclusion in the blockchain. PEPC is seen as a superset of ePBS, with the potential for evolving commitment sets. The design space for commitments is actively explored and developed, with increasing thought and consideration. The evolving role of relays and the potential integration of commitments like PEPC-Boost highlight the importance of balancing constraints and flexibility within the PBS framework.
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Summary
00:00
"Uncommon Core: Exploring PBS and MEV-Boost"
- Uncommon Core is a show exploring crypto ideas hosted by Jon Charbonneau and Hasu, with guests Mike Neuder and Chris Hager discussing PBS and MEV-Boost on Ethereum.
- PBS, or Proposal-Builder Separation, is a design philosophy recognizing the need for protocol actors to outsource certain tasks to third parties for efficiency and decentralization.
- In Ethereum, validators outsource block building to specialized block builders outside the protocol to maintain decentralization and competitiveness.
- PBS aims to create an interface between in-protocol and out-of-protocol roles, ensuring trust-minimized interactions and preventing centralization.
- Vitalik's vision includes centralized production, decentralized verification, and anti-censorship properties, aligning with PBS principles.
- PBS history on Ethereum involves MEV-Geth facilitating interactions between searchers and miners pre-proof of stake merge.
- Flashbots implemented MEV-Boost post-merge, enabling proposers to interact with external block builders through relays.
- MEV-Boost involves a relay facilitating auctions between proposers and builders to ensure trust and prevent MEV theft.
- PBS benefits include decentralization of validators, offloading complexity to specialized builders, and enabling more efficient scaling solutions.
- PBS opens up new design possibilities, like utilizing specialized actors for complex tasks in scaling solutions like roll-ups on Ethereum.
15:06
Optimizing Block Creation in PBS
- Base roll-ups design allows for more sophisticated and economically rational actors to optimize block creation by excluding inefficient attempts and selecting the most efficient ones.
- Economically incentivized parties can handle additional work, like creating proofs for statelessness, to streamline the design process.
- Builders can outsource tasks to out-of-protocol actors, like offering bundle cancellations and instant confirmations, enhancing market structure and efficiency.
- Proposers' commitments in PBS can increase complexity but can be managed effectively by builders, who can fulfill these commitments on their behalf.
- PBS aims to keep validators simple and affordable to maximize censorship resistance, with a focus on minimizing regulatory burdens and discretion over block construction.
- Inclusion lists shift responsibility for censorship resistance, with validators opting into including censored transactions on chain.
- Encrypted mempools like SUAVE enhance privacy and censorship resistance by removing agency from individuals, promoting a "dumb pipe" approach.
- PBS acknowledges the market for transaction ordering to maximize validator revenue, preventing destructive forms of extraction and promoting competition.
- Centralization risks in PBS include a small number of relays and builders controlling a significant portion of the market, leading to fragility and potential network instability.
- Transitioning PBS to in-protocol systems poses technical challenges, including increased complexity, consensus protocol risks, and the need to eliminate reliance on external actors.
29:56
"Protocol Evolution and Decentralization in Ethereum"
- Barnabé's post "Seeing Like a Protocol" discusses enshrining different things and distinguishing between out-of-protocol and in-protocol elements.
- The discussion includes the role of PBS (Protocol Building System) and the need to determine what to enshrine for ePBS design.
- Ownership and evolution of core protocol software like MEV-Boost by Flashbots are highlighted, pointing out the need for clearer distinctions and specifications.
- The current state of relays in the protocol is deemed unstable, with potential risks due to funding challenges and the possibility of reduced relay operators.
- Various alternatives to PBS are explored, with a focus on constraints, decentralization, and economic incentives in block production.
- The challenges of achieving consensus on transaction ordering and the difficulty of constraining validators in a general-purpose design like Ethereum are discussed.
- The impact of constraining validators on auction dynamics and MEV extraction is considered, along with the idea of reducing MEV for liquidity providers and traders by adjusting block times.
- The debate on sacrificing decentralization in validators to enhance Ethereum's utility for decentralized finance and specific user groups is examined.
- The trade-offs between optimizing Ethereum for specific user groups and maintaining certain guarantees are acknowledged, emphasizing the need to balance these considerations.
- The primary user of Ethereum, in contrast to low latency traders, is highlighted as a key factor in decision-making regarding protocol optimizations.
44:22
"Rollups vs Ethereum: User Experience and MEV"
- Rollups prioritize user experience, latency, and other direct user concerns, while Ethereum focuses on longer-term, slower use cases requiring strong guarantees.
- Ethereum's permissionless validator set is a practical choice despite short-term trade-offs like lack of MEV protection and potential censorship resistance issues.
- Chains with opinionated validator sets can enforce specific rules, unlike Ethereum, which aims for broad design goals and pushes intricacies to different layers.
- Ethereum is not ideal for users seeking low latency and low fees without front-running risks, suggesting roll-ups as a better alternative.
- MEV-Boost ecosystem on Ethereum involves software, relay ecosystem, builder ecosystem, and protocol, with stability in MEV-Boost software and ongoing developments in relays and builders.
- Relays in the MEV-Boost ecosystem face challenges like security risks from adding more relays and the dominance of a few builders, impacting blockchain stability.
- MEV-Boost software provides DoS protection, validity checks, and payment checks, with performance and latency optimizations enhancing inclusion rates.
- Optimistic relaying simplifies relay operation by spreading out block simulation, aiming for more economic and sustainable relays in the future.
- ePBS aims to eliminate the need for the relay market by facilitating auctions between proposers and builders without a trusted third party, requiring changes in block format.
- Rollups have more design flexibility than Ethereum, allowing for less strict constraints, potentially one or a few sequencers, and more opinionated approaches like threshold encryption and batch auctions.
59:24
"Proposers choose block validity conditions in design"
- Proposers can sign up for different block validity conditions in the new design.
- EigenLayer commitments are enforceable only at the execution layer, while PEPC commitments are part of the fork choice rule and state transition function.
- PEPC allows proposers to make stronger commitments compared to EigenLayer, affecting block inclusion in the blockchain.
- ePBS focuses on homogeneous commitments, while PEPC allows for heterogeneous commitments by different proposers.
- PEPC is seen as a superset of ePBS, with the potential for evolving commitment sets.
- In PEPC-boost, proposers broadcast commitments, and relays ensure block validity by checking builder compliance.
- For in-protocol PEPC, commitments need to be encoded in block data for enforcement at the fork choice rule.
- PBS and PEPC offer different approaches to proposer commitments, balancing constraints and flexibility.
- SUAVE and PEPC both involve imposing constraints, with SUAVE acting as a mediator between user and validator constraints.
- Enshrining PBS is challenging but progressing, with experimentation starting out-of-protocol before potential enshrinement.
01:13:07
Exploring Commitments in Protocol Design Space
- Different types of commitments are being considered for potential inclusion in the protocol, with a wide design space available.
- Out-of-protocol versions like PEPC-Boost and MEV-Boost+ and MEV-Boost++ from Eigen Layer are being explored.
- MEV-Boost+ and MEV-Boost++ involve partial block auctions allowing proposers to opt-in to restaking commitments.
- Partial block auctions were initially considered as a censorship tool to combat builder censorship.
- Challenges arise when proposers deviate from restaking commitments, risking being slashed.
- The MAX_EFFECTIVE_BALANCE change could increase the value available for slashing by combining validators' stakes.
- Protocol-enforced commitments could prevent proposers from deviating and ensure block validity.
- The design space for commitments is being actively explored and developed, with increasing thought and consideration.
- The implementation of commitments like PEPC-Boost may occur out of protocol, but uncertainty remains about in-protocol integration.
- PBS is a design philosophy emphasizing fairness and decentralization, aiming to provide trustless interfaces for outsourcing duties.
01:26:33
"Exploring Protocol Boundaries: Role of Relays"
- The episode is centered around defining the boundaries and role of protocols, particularly focusing on the PBS protocol.
- Researchers at the EF are exploring the fundamental question of protocol boundaries and roles.
- Initially, ePBS was seen as a way to eliminate relays, but now there's a realization that relays may still have a reduced role.
- Out-of-protocol solutions like relays could offer advantages such as flexible payments and bid cancellations.
- Relays can provide services like fronting money for bids and enabling bid cancellations, which the protocol cannot do.
- Private auctions and latency optimization are additional services that relays could offer.
- The role of relays has evolved to potentially being more of a latency optimizer rather than a fundamental mediator.
- Trustless in-protocol bids could work alongside relays, offering advantages in trustlessness and latency optimization.
- The evolving role of relays may lead to a reduced structural importance of out-of-protocol infrastructure.
- There's a debate on whether to enshrine ePBS in the protocol or maintain governance outside the protocol for sustainability.
01:39:36
Enhancing Trust and Sustainability in PBS
- Relays are crucial for the trustworthiness of the PBS process, especially for the untrusted participants.
- The absence of relays would lead to the top 90% of validators and builders being able to trust each other, while the remaining 5-10% would not be trusted to receive something from a builder.
- Monetizing relays is currently challenging, as the market structure does not support fees, making it easy to bypass them.
- An independent entity supporting relays through grant funding could address relay sustainability issues and enhance governance and development work.
- Layer 2's involvement in funding and building PBS implementations may vary, with some preferring to control their own implementations.
- Standardization across different rollup ecosystems is essential to avoid security risks and ensure trustworthiness.
- Builders across ecosystems need standardized interfaces to facilitate their participation and ensure consistency.
- Different rollups may have varying designs of PBS, necessitating approved standards within each ecosystem.
- The builder market on Ethereum and potential rollups may not be perfectly competitive, requiring a more holistic solution for decentralization.
- Proposals like MEV-Boost+ aim to give proposers more agency for censorship resistance, but there may be hesitancy from validators due to legal and regulatory uncertainties.
01:53:34
"Pragmatic Solutions for Censorship Resistance in Networks"
- Encrypted mempools offer a comprehensive solution for censorship resistance and plausible deniability throughout the supply chain, contrasting with MEV-Boost+ which places the burden of censorship resistance on individuals.
- Proposers in the network are unlikely to want agency, making solutions like encrypted mempools and encrypted computing environments, allowing efficient block building on private data, crucial for solving the problem.
- Inclusion lists may not be universally adopted by validators due to legal concerns, but could still be valuable if a significant portion of validators use them, contributing to a patchwork of solutions for censorship.
- Pragmatism over ideology is key in addressing censorship, with tools like inclusion lists and min bid in MEV-Boost serving specific purposes within the network, emphasizing the importance of market forces and realistic approaches.
